Inchcape, the world's biggest car retailer, on Monday scrapped its final dividend and offered a bleak outlook for the motor industry.

In a sign of distress in Russia, formerly one of the group's fastest-growing markets, Inchcape said that its suppliers were beginning to price their vehicles in dollars rather than roubles, suggesting falling confidence in the Russian currency, which was devalued on Monday for the sixth time in five weeks.

Inchcape heaped further misery on the motor industry more generally by admitting that its failure to meet profit expectations meant it was negotiating with lenders to ensure that its banking facilities were “appropriate for a downturn in trading in 2009”. The shares fell 20p, or 28 per cent, to 50 and three quarters p after the warning, its second in two months.

The company said that the speed of the industry's downturn made it difficult to forecast results but that 2009 earnings would be below expectations. It also said that it had drawn down £540 million from an existing £1 billion credit facility. It was now talking to its lenders and said that interest costs may rise.

The group, which had previously announced plans to cut 1,600 jobs, said that it expected the figure to be 1,900 — or more than 10 per cent of its global workforce of 17,000 — amid further restructuring of its European businesses, principally in the UK.

André Lacroix, Inchcape chief executive, said: “We believe that in 2009 we will be faced with a downturn that is unprecedented, frankly. We were surprised by the speed of the downturn and the way it has spread throughout the world. It's essentially a consumer confidence issue. Yes, credit and liquidity are factors and it's more difficult in some places [to borrow] to buy a car, but the speed of the downturn is a confidence issue.”

The company said it expected more severe sales declines in most of its markets than it had forecast because of the “global recession and significant reduction in credit availability”.

Inchape's warning came as both the UK and American car industries await government bailouts.

The company trades in 25 countries and has the second-largest dealership network in the UK after Pendragon. Inchcape's Eastern European businesses have recorded double-digit growth and many investors expected its geographic spread to insulate it against the slowdown.

However, Mr Lacroix, warning that the Russian market was faltering, said: “The rouble has devalued quite a bit and they [the manufacturers] need to protect their positions.”

The currency has lost more than 24 per cent of its value against the dollar in less than three months.

In its UK business, new car sales fell by 37 per cent in November, while in continental Europe they fell by about 26 per cent and sales in Australia fell 22 per cent.

The group reported a 4.9 per cent fall in like-for-like sales in the first 11 months of the year at constant currency rates. It said underlying results for 2008 would be in line with previous expectations.

Mr Lacroix added that he expects trading to stabilise in 2010 before hopefully rebounding in 2011. The company is reducing its inventory and reducing its costs accordingly. “When the market is down it's about building market share and we're growing, so when the market turns we're ready to bounce,” he said. “We will emerge as a much stronger player.”

Ben Spruntulis, an analyst at Citigroup, said he expected consensus forecasts of £190 million in profits next year to fall to virtually zero. “Eight weeks following its last profit warning, we have materially lower guidance on the outlook for Inchcape's major markets. Given the high ticket discretionary nature of car retailing, the dependence on manufacturers to provide credit and lack of visibility on near-term trends, we remain cautious.”

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